IN a statement sent to Rigzone on Thursday, energy and environmental geo-analytics company Kayrros noted that jet fuel prices have reached 12-year highs relative to diesel, “helped by the reopening of China”.
“Since China’s reopening on 8 January, which followed more than 1,000 days of Covid restrictions, jet fuel demand has been climbing,” Kayrros said in the statement, adding that, “as the Chinese took to the skies to celebrate their freedom and the Lunar New Year, national jet fuel demand doubled within a week”.
Kayrros noted that the reopening has boosted the global aviation sector, which it said is still recovering after Covid. Year-on-year growth in jet fuel demand reached 20 percent last month, according to figures from Kayrros, which cited analysis of ADS-B data – signals from aircraft transponders.
In the statement, Kayrros outlined that data on air cargo suggests the global economy may not be rising with increasing jet fuel prices. Passenger travel demand growth now outperforms that from air freight, according to Kayrros, which said this may be a worrying sign for the economy.
“Air freight is considered a leading economic indicator,” Kayrros’ President Antoine Rostand said in a company statement.
“That’s why the drop in air cargo demand which our data show could be a red flag for the economy … For now, this has been more than offset by the surge in passenger flights, particularly on low-cost airlines. But this will continue to cause rising prices, which will drive down air cargo demand,” he added.
“It, therefore, remains to be seen how the global economy will react. We can be certain that real-time monitoring of jet fuel data will be key to understanding whether China’s reopening will give the world economy the shot in the arm it needs,” Rostand continued.
Jet Fuel Price Forecast
In a report sent to Rigzone on January 31, Fitch Solutions Country Risk & Industry Research said the company had raised its global annual average price forecast for jet fuel to $140 per barrel for 2023.
The figure marked an increase of 10.5 percent over Fitch Solutions’ previous view for prices of $127 per barrel, the company highlighted. Fitch Solutions outlined in the report that the increase reflected “tighter supplies globally and resurgent demand for air travel from all regions aided by a rapid return of the Chinese market”.
“The outlook for jet fuel prices in the short-term is tilted to the upside but we hold a mixed view for prices from current spot levels,” the Fitch Solutions report, which pegged the global spot average at $166 per barrel, stated.
“The high volatility seen in the U.S. market is likely to moderate in the coming months, giving the global market average a bearish tilt in the near term. While in Europe prices are forecast to rise in the short-term on the fuel import ban from Russia which will come into effect in February 2023,” the report added.
“In Singapore, we forecast the annual average prices to come just below current spot prices, as increased refinery runs and exports from China are likely to keep markets well supplied despite expectations for increased regional consumption as China’s borders re-open with few restrictions,” the report continued.
Demand Growth
In its latest oil market report, which was released in January, the International Energy Agency (IEA) projected that global oil demand is set to rise by 1.9 million barrels per day in 2023 to a record 101.7 million barrels per day.
Nearly half the gain will come from China following the lifting of its Covid restrictions and jet fuel will be the largest source of growth, up 840,000 barrels per day, the report outlined.
“This year could see oil demand rise by 1.9 million barrels per day to reach 101.7 million barrels per day, the highest ever, tightening the balances as Russian supply slows under the full impact of sanctions,” the IEA oil market report stated.
“China will drive nearly half this global demand growth even as the shape and speed of its reopening remains uncertain,” the report added.
The IEA’s next oil market report is currently scheduled to be released on February 15.
By Andreas Exarheas
To contact the author, email andreas.exarheas@rigzone.com